In the United States, the limited liability company (LLC) is a relatively new business structure compared to the other business structures (it became popular at the beginning of this century). It is a hybrid between a general partnership and a corporation, and offers the best features of the both. A limited liability company is formed by the consent of its member-owners. The company must file articles of organization to the state in which it operates. The state authorizes the organization of the firm by issuing a charter. A limited liability company is viewed as a legal entity apart from its member-owners.

The advantages:

The disadvantages:

  • The main disadvantage of an LLC is the lack of uniform laws across the states. If an LLC decides to expand to another location in a different state, the firm must review the laws of the state to ensure that the LLC complies with all the rules of the new state of operation.
  • Since the LLC is a relatively new invention, some creditors may not be familiar with the business structure and might be less willing to give out loans to the company.
  • There is the limitation in that people who would invest as shareholders are thrown by the term "membership", which is what they would have in the LLC rather than a "share".

Basically, there are few, if any, disadvantages to an LLC. The current disadvantages will be phased out as people and the business world become more familiar with the LLC.

Kurt: Thank you very much for the insights and good points.

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